# Questions tagged [skew]

The tag has no usage guidance.

47 questions
Filter by
Sorted by
Tagged with
32 views

### What are popular metrics for Option Skew?

What are popular metrics to track skew? Would it be the difference between OTM option and ATM option IV? Would it be a percentage difference in IV? Also, if both are valid, would a % change be ...
192 views

### Forward Volatility vs Spot Volatility in Option Skew Models

My question is regarding Volatility Skew Models and their inputs. I have noticed that a vast majority of models take as an input the forward of the underlying (even in the case of stocks - where the ...
51 views

### Measuring implied move priced into an event

It's well known that options price in an expected move in the underlying going into events, such as earnings announcements. I currently measure this implied move by computing the forward variance ...
81 views

### Practical Skew Model For Equity Options?

I'm looking for a simple model I can use to calibrate equity implied volatility surface. There are several models published in the literature, and most of them seem far too sophisticated for my ...
27 views

### Why Jarque - Bera values are so high? Is this normal? [closed]

Please advise whether the following is a normal occurrence: In the above table I have Autocorrelation at lag1, LB, Skew, Kurt and JB test. I have noticed that whenever the value of Kurt increases, ...
187 views

### Fitting Gatheral's SVI model

I was considering using Gatheral's formula for fitting option skew. In the specific (commodity) market that I am concerned with, the underlying is ca. at 50, and typically 5 integer strikes left and ...
238 views

### Fitting Function for Skew

I am faced with having to fit skew/smile to option quotes with different strike and same maturity. In order to keep things reasonably simple and to avoid potential artifacts from fitting higher order ...
629 views

### Variance swap volatility - ATMF vol, Skew and Curvature

In a pure diffusion setting, it is a well known result that the volatility $\sigma_T$ of a fresh-start variance swap of maturity $T$ as seen of $t=0$ verifies \begin{align} \sigma_T^2 &= \Bbb{E}_0^...
91 views

170 views

### Relationship between Implied Volatility Curve Derivatives and the Underlying's Moments

Very probably this question has been posed before, so if someone can pose the link to the relevant question, it would be appreciated. What is the relationship between the implied volatility skew and ...
499 views

### Asset-Or-Nothing call option price with skew

I have never seen a formula browsing the web for an asset or nothing option price when skew is accounted for. I am surprised I do not see something for this which should be standard in FX since ...
986 views

### Spot and Vol Correlation in Idealised Regimes of the Volatility Surface

From http://www.globalvolatilitysummit.com/wp-content/uploads/2015/10/Santander-Volatility-Trading-Primer-Part-II.pdf it states that there are the four idealised regimes of volatility surface. 1) ...
4k views

The presence of skew causes a correlation between volatility and spot. This correlation produces a negative shadow delta for all forward starting products (forward starting options have a theoretical ...
2k views

### Vol skew and spot-vol correlation

Why does the market assign a vol skew in the presence of a spot vs vol correlation. Both heuristic/fundamental answers as well as mathematical explanations welcomed
213 views

### Volatility Smile/skew in volatile markets

In a volatile market with uncertainty it's more likely that we see a volatility skew and not so much a smile. Therefore it must hold that, in chaotic markets, out-of-the-money calls and in-the-money ...
155 views

### Evaluating trading strategies by the skewness of returns

How to deal with skewness of returns when evaluating different trading strategies? More specifically, I'm back testing different strategies to be implemented as an automated black box strategy. While ...
2k views

### Why is a variance swap long skew?

I can appreciate the mathematical derivation, but can anyone explain this in a more intuitive sense? I often come across the mistaken belief that due to the replicating portfolio being long more ...
134 views

### SKEW Index as parameter in lognormal distribution

The CBOE publishes a SKEW index, which is SKEW = 100 - 10*S, so from the index itself we can get S = (SKEW - 100)/10. I just ...
306 views

### volatility skew for lognormal model is flat?

Does anyone know why the volatility skew for lognormal model, such as BK, should be a flat line, meaning that implied black volatility for options will be same for those with different strike prices? ...
388 views

### Does the fact that volatility is not constant imply existence of skew?

I had a question regarding the existence of the volatility skew. I've tried researching it a fair bit and I come across a few different explanations: 1. Market participants like buying downside puts ...
450 views

### Understanding skew of SPX - Why does IV of OTM puts increase with strike?

I've been trying to understand the skew I see when looking at the skew of SPX. Here is a snapshot today from thinkorswim. I understand why IV increases for ITM puts -- namely because there is a ...
775 views

### Why can't you arb skew by buying options with low implied vol and selling high implied vol in the same month and dynamically hedging?

there's something I've been trying to understand for a while now and I just can't quite understand with regards to skew. In the same month, why can't you buy a option that have low implied vol on the ...
270 views

### How do I track implied volatility of specific delta?

I'm a newbie with respects to volatility trading and options. I recently purchased a book on the topic called "Trading Implied Volatility -An introduction" by Simon Gleadall. It's been one of the most ...
348 views

### Skew in Black Scholes model

We are modeling Foreign exchange rates using Black Scholes model given below: $$F_{t}=F_{t−1} + (r_d−r_f)F_{t−1}dt + \sigma F_{t−1}dW_t$$ Where: $F_t$ and $F_{t−1}$ are FX rates at time $t$ and \$t−...
106 views

### Why vertical skew is same for puts and calls

What is the reason that the vertical volatility skew graph(decreasing IV as the strikes increase) is the same for the puts and calls? The loose explanation is because of put call parity, but I am not ...
2k views

### Black Scholes - how to calculate delta with a vol skew

I am trying to calculate the delta of an option at different strike prices where the underlying has a pronounced implied volatility skew in order to correctly hedge an options strategy. Researching ...
671 views

### Calibration Problem in the LMM-Skew (Shifted Diffusion) Model

I have implemented the LIBOR market model (LMM) and I am quite satisfied with the results. I have now added a skew to the model as described in 10.1 of Brigo/Mercurio. That is, I have replaced the SDE ...
154 views

### Why doesn't VG flatten volatility skew for short term options?

The VG process, from my inexpert point-of-view, seems to nearly perfectly model equity distributions. For longer term options, there is little to no volatility, skewness, or kurtosis parameter skew. ...
439 views

### Why are short expiries associated with more pronounced volatility skews?

I've noticed that for a given strike price, the shorter expiration dates of options have more pronounced volatilities why is that?
1k views

### Interpolate option volatility in delta space in R

I have a bunch of deltas and option implied vols at those deltas. I would like to interpolate them in R. Interpolating them in delta space seems difficult, since normally you would like the ATM calls ...
824 views

### Why does Skew measure remain more-or-less constant for Listed Expiries?

I have looked at the Variance Swap Papers published by GS-VarSwap and JPM-VarSWap where they talk about approximation to VarSwap strike using ATMF vol and Skew (slope of the volatility skew for 90-110 ...
6k views

### Skewness and Kurtosis under aggregation

Returns possess non-zero skewness and excess kurtosis. If these assets are temporally aggregated both will disappear due to the law of large numbers. To be exact, if we assume IID returns skewness ...
749 views

### Option Portfolio Risk - Volatility/Skew - practical implementation

I'm trying to improve my methods for calculating real-time US Equity option portfolio risk. My main problem is volatility "stability" across all strikes in an option series. The current ...
2k views

### How should I estimate the implied volatility skew term when calculating the skew-adjusted delta?

I'm trying to come up with the implied volatility skew adjusted delta for SPY options. I'm working with the following formula: Skew Adjusted Delta = Black Scholes Delta + Vega * Vol Skew Slope. I ...